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How to Calculate Markup Price

What Is Markup Percentage?

A markup percentage is the amount of the cost of an item that you add on to create the selling price. Many retailers use markups to set their selling price. However, some confusion comes in when there is a reference to margin along with markup. A margin is different from a markup. To explain a markup, lets use an example.

You purchase a box of paper that cost one dollar. You aim for a profit of 50%. By multiplying the cost by 50%, you get 50 cents. Add that to the cost that you paid to purchase the box of paper, now the total is one dollar 50 cents. This is the selling price of the box of paper. Therefore, your markup percent is 50%.

To look at a margin, let's use the same example. A 50% margin means that half of the selling price is your profit. Therefore, using the example above, to get a 50% margin on the box of paper we would have to sell it for two dollars. Margin is defined as the percent of the final selling price that is profit.

Again, markup is the amount over the cost of the goods that you add to make the selling price. As seen above a 50% markup is less than a 50% margin. The margin works somewhat backwards, taking the selling price times the margin to reach the cost of the item.

In general, retailers use markup to set the selling price of an item but investors look at the profit margin at a total level, not an individual level. The amount of profit that a company is making overall generally determines the success of the business. Therefore, using the easier method of markup to set selling price on items and calculating an overall profit margin as a whole on total sales works well.

Markup Price

Calculating Selling Price using Markup Percentage

Before you get the selling price or target price, first you need to determine product cost and markup percentage. Then using below formula you can get the selling price. This mark up formula is based on product cost.

Selling Price = (Markup / 100% * Product Cost) + Product Cost

Example 1:

Question:
Suppose a cost to make a bag is $20. What is the selling price, if we want to markup the price by 30%?

Answer:
Product Cost:$20
Markup: 30%

Selling Price = (30% / 100% * $20) + $20 = $6 + $20 = $26

So selling price would be $26 and markup price $6.

Example 2:

Question:
You purchase an item for $10, and you want to markup the price 40%. At what price you should sell that item?

Answer:
Product Cost: $10
Markup: 40%

Selling Price = (40% / 100% * $10) + $10 = $4 + $10 = $14

This example gives you a price markup of $4.

Calculating Markup Percentage - Faster Way

To calculate markup percentage in faster way you can use this formula:

Selling price = (100% + Markup) x Product Cost

Example 1:
Product Cost: $20
Markup: 30%

Selling Price = (100% + 30%) x $20 = 130% x $20 = $26

Example 2:
Product Cost: $10
Markup: 40%

Selling Price = (100% + 40%) x $10 = 140% x $10 = $14

Calculating Percentage Markup

To calculate percentage markup, you need determine product cost and selling price. Then using below formula, you can get the percentage markup. This mark up formula is based on product cost.

Markup = (Selling Price - Product Cost) / Product Cost * 100%

Example 1:

Question:
If you purchase an item for $15 and sell it for $20. Calculate your percentage markup!

Answer:
Markup = ($20 - $15) / $15 * 100% = $5 / $15 * 100% = 33.33%

So your percentage markup would be 33.33%

Example 2:

Question:
Product cost is $10, and you markup the price by $3. Calculate your percentage markup!

Answer:
Markup = $3 / $10 * 100% = 30%

Video: How to Calculate Markup Percentage


 Last updated on October 4, 2010

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Comments 5 comments

christian78 profile image

christian78 2 years ago

This stuff can be confusing but nice hub. Well put together, Thanks

Anonymous 23 months ago

I think you're being verbose to the point of confusion on how to calculate mark up. There's no need for the first method. I liked the description though, thanks.

i am who i am 21 months ago

no comment

Anadirunika 14 months ago

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jessa mhae avelino 7 months ago

i wish that this calculating has other language like filipino language :)

but the video helps me

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